Santa Ana Mayor’s Property Swap Raises Questions

Santa Ana Mayor Miguel Pulido. (Photo by: Violeta Vaqueiro)

ByADAM ELMAHREKNovember 14, 2013 at 2:00 PM

Santa Ana Mayor Miguel Pulido voted for a $1.35-million no-bid city contract with a local auto parts firm just over a year after he and members of his family purchased a home from the store owner for $230,000 less than its fair market value, according to public records.

Pulido did not disclose the purchase of the Westminster home — which was part of a real estate swap between the Pulidos and Rupen James Akoubian, president of NAPA Orange County Auto Parts — before casting his vote on the company's contract in December 2011.

Nor did he report the home on his statements of economic interest, known as Form 700s, that are required by state law.

In exchange for the home, Pulido sold Akoubian a lot that is attached to the back of NAPA Orange County Auto Parts, which is located on First Street in Santa Ana, just a block from the Pulido family's auto care shop. Both transactions were for $200,000.

However, after the sale was recorded, Orange County Assessor Webster Guillory determined that the home was not sold at fair market value and appraised it at $430,000 based on comparable sales in the neighborhood. Guillory appraised the lot behind the parts store at its $200,000 sale price.

Then in August 2012, Mayor Pulido's family members, including his father and two brothers, transferred the house property solely into his name. That same day, Pulido sold the home for $397,000 and netted a $197,000 profit. He did not disclose the sale on a Form 700 as required by law.

Good-government experts say the series of transactions could represent an illegal gift to Pulido, if not worse.

“Either [Akoubian] was giving [Pulido] a $200,000 bribe, or he was incredibly stupid," said Tracy Westen, president of the Los Angeles-based Center for Governmental Studies when first told of the transaction. Westen later qualified his remarks, saying several questions would need to be answered before one could come to that conclusion.

Regardless, the relationship appears to have been profitable for both sides.

While Pulido realized the windfall from the home sale, city records show NAPA Orange County Auto Parts went from having a $50,000 annual contract as one of many auto parts suppliers for the city's vehicle fleet to holding a three-year, sole-source contract valued at $450,000 annually — a nine-fold increase.

Before the 2011 contract, the city ordered replacement parts for its more than 750-vehicle fleet from more than 80 different vendors, according to city officials. But under the new contract, the city buys all of its parts through NAPA Orange County Auto Parts, according to city spokesman Jose Gonzalez.

“The overall cost associated by purchasing directly from multiple vendors may or may not necessarily be cheaper,” Gonzalez wrote in an email. “Under the current consignment process, [Orange County Auto Parts] is responsible for maintaining and obtaining all auto parts. The consignment business model provides for many efficiencies, such as Just-In-time (JIT) availability of parts and has increased staffing and process efficiencies.”

Pulido did not return a reporter's calls, emails or texts seeking comment.

When a reporter approached Mark Akoubian, a co-owner of the auto parts store, regarding the home sale, he asked: “How did you know about the house?”

Rupen James Akoubian was outraged when a reporter questioned him about possible illegalities regarding the property swap. He said the lot he purchased from the Pulidos is extremely valuable to his business operation and indicated that the home was fairly priced.

“You don't know the condition of that house. You don't know what that particular property meant to me. You need to see my operation to evaluate that property in back of me,” Akoubian said, referring to the lot. “I have 12 trucks that I've [got to] park somewhere, and I've got big deliveries that come in. … I would have paid $500,000 for that lot. You don't even know what you're talking about.”

Akoubian declined to elaborate further and ended the conversation by threatening the reporter with a lawsuit.

"I will sue you — trust me,” he said.

Regarding the condition of the house, a check at Westminster City Hall found that no building permits have been issued for the house since 1996, indicating that there were no major renovations on the house after Pulido purchased it. And there were no code violations on record that would show the house in a state of disrepair.

There is a form that the buyer would have to fill out that could provide evidence to the assessor that the house had a below-market value. However, whatever was stated in the document, which is not public, attached to the home bought by the Pulido familiy was not enough to persuade Guillory to reduce his assessment.

Guillory pointed out that his office's appraisal, which considerably hiked the property bill, was never challenged.

Also, comparable sales from 2010 show homes in the same Westminster neighborhood being sold for between $350,000 and $500,000. And the lot, Guillory said, was worth $200,000 based on “the price of vacant land in Santa Ana.”

Possible Legal Issues

In the nearly two-year period between when his family bought the Westminster house and he sold it, Pulido voted for two separate contracts with NAPA Orange County Auto Parts.

In January of 2011 — less than four months after the purchase — Pulido voted with the rest of the City Council to renew Akoubian's previous $50,000 contract with the city, according to meeting minutes. That vote could have been illegal if Pulido violated the gift limit, said Bob Stern, CEO of the Center for Governmental Studies and co-author of the state's Political Reform Act.

Then on Dec. 19 of that year, the mayor and his colleagues voted unanimously on the firm's exclusive contract.

A NAPA Orange County Auto Parts news release said the “unprecedented” contract was part of the city's effort to close a $30-million budget deficit. “It is a great honor to be chosen as sole supplier to such a great partner as The City of Santa Ana,” Mark Akoubian stated in the release.

While on its face the deal appears suspicious, Westen said there are questions that need answering before Pulido and Akoubian could be accused of a crime.

Pulido, Westen said, would have to be involved somehow in securing the contract with Akoubian beyond casting a favorable council vote. “The problem is tracing that causal chain from start to finish,” he said.

Also, there could be reasons for Akoubian to sell the house so cheap that only Akoubian would know, Westen said.

It is also possible, according to another ethics expert, that Pulido violated the state's political reform act.

Stern said the house transaction could be an illegal gift of up to $230,000 from Akoubian, depending on the percentage of the home Pulido owned after he and his family bought it.

The votes for Akoubian's contracts are strong indicators that the house was actually a gift, Stern said. The gift limit for elected officials was $420 in 2010.

Also, Pulido appears to have committed at least one Form 700 violation with the home transactions and perhaps several, Stern said.

No public documents show Pulido's share of the Westminster home when he owned it with family members. However, if his share was more than $2,000 at any time between 2010 and 2012, he would have to disclose the property on his Form 700, Stern said.

The exception to that would be if the Westminster home was Pulido's residence, Stern said. It is well known that Pulido resides in Santa Ana's Floral Park neighborhood.

And because of the home's location, it is unclear whether Pulido had to disclose the 2012 sale on his Form 700 with the city. Properties only have to be disclosed if they are within the city's borders or two miles beyond. The house is right on the two-mile mark, according to Google Maps.

But, Stern said, Pulido should have disclosed it on the Form 700 he filed with the Orange County Transportation Authority, where he sits as a director. His filing with OCTA for 2012 makes no mention of the property.

Pulido "certainly would have to list the sale as income, unless he didn't get the money,” Stern said.

Concern From Council Colleagues

Some council members who were present for the 2011 vote on the sole-source contract said that the contract didn't seem questionable at the time. And they don't recall Pulido asking them to vote for it. But they acknowledged that Pulido's votes and relationship with Akoubian are worth investigating.

Councilwoman Michele Martinez — who along with a six-member council majority have opposed the mayor and worked to reduce his influence at City Hall — said Pulido should have recused himself from the vote out of “an abundance of caution.”

“It's very unethical behavior, and it's unacceptable. The mayor's been around the block,” Martinez said. “He should have stayed far away from this.”

Councilman David Benavides said that the situation looks “a bit suspicious and peculiar,” and Councilman Vincent Sarmiento said the situation looked “disturbing.”

Despite the concern, however, council members said they don't recall whether Pulido made an effort behind the scenes to secure the contract for NAPA Orange County Auto Parts.

Gonzalez, the city’s spokesman, wrote in an email that Pulido made no such attempt to influence the process.

A History of Questionable Dealings

This certainly isn't the first time Pulido's business dealings have raised eyebrows.

He was in line for a $500,000 “success fee” for helping put together a deal to auction off public buildings under Gov. Arnold Schwarzenegger to help offset a then major state budget deficit. The sale was ultimately canceled, however, and he never received the fee.

Pulido's consulting firm, The LaFarga Group, has had its articles of incorporation suspended since September 2008 by the California Franchise Tax Board because the business has not paid thousands of dollars in corporate income taxes. The mayor and his family members have also been the target of tax liens in recent years.

Mutual Admiration

At a council meeting last week, Pulido honored Akoubian, who purchased the auto parts store in 1991, for being a finalist in the U.S. Small Business Administration's small-business person of the year award.

“Orange County Auto Parts is the largest and most successful NAPA store in Orange County,” Pulido read from a prepared statement. “And it's because of Jim's foresight and his small business management skills.”

Akoubian in turn told the mayor that the city has made great progress since he opened his store.

"Since 1991, the city has come a long ways and we've reaped the rewards and we appreciate all your efforts and I'm thankful for it."